The AI Bubble

When AI companies raise billions despite burning through cash faster than they can monetize.

The AI Bubble: When Will It Burst?

One thing is for sure—the time will come when we hear the term "AI" and reflect on one of the most spectacular financial phenomena of our era. Whether it ends in a transformative industry or a cautionary tale remains to be seen.

Amazon's $50 Billion Bet on OpenAI

In a move that perfectly encapsulates the current AI investment frenzy, Amazon is reportedly in talks to invest up to $50 billion in OpenAI. This comes despite Amazon having already pumped billions into OpenAI's competitor, Anthropic, including an $11 billion data center campus in Indiana.

The deal is structured as a "chips-for-equity" arrangement—Amazon would provide OpenAI massive access to its proprietary Trainium and Inferentia AI chips, alongside significant dedicated server capacity within AWS. This investment would be the cornerstone of a larger $100 billion funding round that could value OpenAI at an unprecedented $830 billion.

But here's where it gets interesting: this astronomical investment is being discussed while financial experts are warning that OpenAI could go bankrupt by mid-2027.

The Numbers Don't Add Up

OpenAI's financial situation tells a sobering story:

  • $14 billion projected loss in 2026—roughly three times worse than 2025 estimates
  • $44 billion in cumulative losses expected from 2023 through 2028
  • $115 billion burn projected between 2025 and 2029
  • 95% of ChatGPT's 800 million users don't pay, undermining the revenue model

The company's annualized revenue hit $20 billion in 2025, which sounds impressive until you realize their infrastructure costs are consuming it entirely. According to leaked Microsoft data, in the first half of 2025, OpenAI's inference costs actually exceeded its revenue. The more users use it, the faster the company loses money.

OpenAI has signed up to $1.4 trillion in commitments over the next eight years for computing deals with cloud and chip giants. They're spending almost $100 billion on backup data-center capacity alone.

The Broader AI Bubble

The disconnect between infrastructure spending and monetization is staggering. In 2026, global AI infrastructure investment approached $400 billion annually, yet enterprise AI revenue remained capped at approximately $100 billion.

Even Google DeepMind CEO Demis Hassabis acknowledged the concern:

"It feels like there's obviously a bubble in the private market... You look at seed rounds with just nothing being tens of billions of dollars. That seems a little unsustainable."

The numbers are brutal across the industry:

  • Capital expenditures from Microsoft, Alphabet, Amazon, and Meta are expected to rise 34% to roughly $440 billion combined over the next year
  • Nearly two-thirds of deal value in the U.S. went to AI and Machine Learning startups in the first half of 2025, up from 23% in 2023
  • OpenAI alone has committed to spending more than $1 trillion on AI infrastructure

Elizabeth Yin of Hustle Fund reviewed hundreds of AI startups' financials and concluded:

"Most AI startups will go bankrupt within 18–24 months… The numbers are brutal."

Many startups are "just wrappers around existing APIs from OpenAI or Anthropic, with no real moat." The second the underlying models get cheaper or offer native features, these companies are toast.

The Path Forward (Or Not)

OpenAI's own forecasts predict losses tripling before somehow pivoting to $100 billion in revenue by 2029 and meaningful profits by 2030. The revenue split would be 50% from ChatGPT, 20% from API sales, and 20% from "other products."

Financial analyst Sebastian Mallaby suggested that after running out of cash, OpenAI could be "absorbed by Microsoft, Amazon or another cash-rich behemoth." Perhaps that's the real endgame—not profitability, but acquisition.

The echoes of the dot-com bubble are hard to ignore: speculative financing, sky-high expectations, and a capacity-driven overbuild. While companies like NVIDIA and Microsoft provide some buffer against total collapse, the infrastructure gap and speculative nature of AI startups mean significant risks remain.

What Happens Next?

The FTC and European Commission have launched inquiries into these massive AI investments, questioning whether they create "artificial demand" and "ecosystem lock-in" that stifles competition. Regulatory scrutiny in 2026 has reached a fever pitch.

For now, the money keeps flowing. Amazon betting $50 billion on a company that might go bankrupt in 18 months is either visionary genius or peak bubble behavior. History will be the judge.

One thing is certain: when billions flow into companies that lose money on every customer interaction, we're witnessing something unprecedented. Whether it's the birth of a transformative industry or the setup for a spectacular correction, the AI bubble of 2026 will be studied for decades to come.

The AI investment landscape changes rapidly. The figures cited here are based on reports from January 2026.